Pension measures

Labour & European Law ReviewWeekly Issue 28109 August 2012

The Equal Treatment Directive states, among other things, that employers cannot discriminate on the ground of age, unless they can objectively justify it. In Torsten Hörnfeldt v Posten Meddelande AB, the Court of Justice of the European Union (CJEU) said that the directive did not preclude a national measure which allowed employers to terminate an employee’s contract when they turned 67, even if it did not take into account the level of the pension which the person would receive.

Basic facts

Mr Hörnfeldt worked for the Swedish postal services agency between 1989 and 2006 on a range of part time contracts. When he turned 67 on 15 May 2009, his contract was terminated in line with Swedish employment protection law.

This provides that an employee has an unconditional right to remain in employment until the end of the month in which they reach the age of 67. The contract would then be terminated but would not amount to a dismissal. This is known as the “67-year rule”.

Mr Hörnfeldt brought a claim on the basis that it constituted unlawful age discrimination.

Decisions of lower courts

The Swedish district court took the view that although the 67-year rule was established to give individuals the right to work longer and increase the amount of their retirement pension, there were no specific grounds giving an employer the right to terminate the contract when an employee reached 67.

It held that it amounted to a difference of treatment based on age, but asked the CJEU to decide whether:

a national rule which gives rise to a difference of treatment on grounds of age can be legitimate even if it is not clear why the rule came into being nor what aim it was trying to achieve

a national retirement provision to which there was no exception and which did not take account of factors such as the pension which an individual might ultimately receive, went beyond what was appropriate and necessary in order to achieve its aims

Decision of CJEU

The court said that, although the aim behind the rule was not clearly stated in the legislation, that was irrelevant as long as it was possible to identify its underlying purpose.

It was clear that the rule gave employees the unconditional right to continue to work until they reached 67, which allowed them to increase the income on which their retirement pension would be calculated until that age, and thus to increase their pension.

Nor did workers have to withdraw from the labour market completely, as the provision did not create a mandatory scheme of automatic retirement. Instead, it just laid down the conditions under which employers could opt out of the principle of non-discrimination on grounds of age and give notice to employees at 67. There was nothing to stop the employer and employee from agreeing a new fixed-term contract and subsequently renewing it.

The rule also took account of the fact that workers could claim their pension when they turned 67, thereby providing an alternative source of income which could, be supplemented by additional benefits.

It concluded that the Equal Treatment Directive did not preclude a national measure which allowed employers to terminate an employee’s employment contract on the sole ground that they had turned 67, even if it not take not take into account the level of the retirement pension which the person would receive.

The measure was objectively and reasonably justified by a legitimate aim relating to employment and labour-market policy and constituted an appropriate and necessary means by which to achieve that aim.

Comment

Although many employers no longer have a retirement age following the abolition of the default retirement age, this case provides yet another example of the European Courts finding that a retirement age can be justified on the basis of social policy aims such as intergenerational fairness, as in the case of Seldon. Employers should remember that a court will also consider the extent to which any retirement age is necessary to meet those social policy aims.